Downtown View: Competition Might Improve Old Rental Buildings

Downtown residents are enjoying a certain satisfaction they didn’t expect. Those dreadful absentee landlords who suck all the rent money out of their buildings while keeping them in slum-like condition are now facing competition from such new luxury buildings as the Kensington in the Theatre District, the Avalon near North Station and the Watermark in the Seaport.

Those absentee landlords, who are all over the North End, Beacon Hill and to some extent, the Back Bay, might have to spend real dollars on fixing up their apartments. Poetic justice? You bet.

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“Those older units are a dying breed,” observed Toni Gilardi, a long-time real estate broker in the North End. “Having a dishwasher is no longer a luxury. Kids are so spoiled that they walk into these places they can afford, and say, ‘Mommy, I can’t live here.’ ”

Betsey Barrett, a broker with Brewster & Berkowitz on Beacon Hill and in the Back Bay and South End, agreed.

“The new high-rise rentals have had a big impact,” she said. “Landlords who used to charge a premium and not update their space are now having to update or take significantly less rent.”

Barrett said she started talking with her landlords a couple of years ago about upgrading. Those that haven’t or are still charging high rents have been stuck with empty apartments.

“There has been a lot of inventory sitting in September, which is atypical for our market,” she said.

Despite the clear trend that landlords have to fix up their units or else, the brokers see smaller trends and more nuanced activity.

The new buildings are pricey – two-bedrooms with about 1,000 square feet in the Watermark are listed for between about $4,500 and $6,600. But you get a lot for the money—a billiard room, views, a sunbathing roof, a dog washing spa and a dog run, fitness center, yoga space, bicycle storage and a charging station for your electric car, among other amenities.

What don’t you get? The charm of the older neighborhoods, and the proximity of the shops and restaurants the city’s older neighborhoods enjoy, although those conveniences will eventually come to the newer buildings.

But compared to a nicely renovated one-bedroom, 331 square foot apartment on Willow Street on Beacon Hill for $3,000, about twice as much per square foot as a luxury building, many young people would probably choose the Watermark and invite a roommate to share the cost.

A subtlety brokers have noticed is that with the sales market so tight, renters who otherwise might have bought a place and moved into it, thus freeing up their unit, are staying put.

As more new units have come on the market, there has been a slight dip in the average rent. That may be due in part to the old buildings’ neglectful landlords having to lower their rent. Gilardi has noticed that some new apartments offer free rent for a month or two to soften the blow of the high cost.

She expects to see a lot of churn because of high rents and possible vacancies in the new buildings. “Renters are going for the deals in high rises,” she explained. “When the rent goes up to what it is supposed to be, they may move back to the older units.”

If the new luxury rental buildings face vacancies, she expects the owners to turn them into condominiums and sell them. That will take rental units off the market.

She also said that with the high sales prices, individual landlords are selling their units as condominiums, also taking them off the rental market.

Another peculiarity she’s noticed—broken leases. “Prices are going up, but there is at the same time a significant number of lease breaks in the middle of the term in January, February and March,” she observed.

She said Boston might be losing talent to warmer climes, or that people have had changes in jobs or marital status, but she has no solid explanation for this trend.

Gilardi is philosophical about the changing rental market. “The market moves constantly,” she said. “If it didn’t, people would have no place to live because the people who are settled would never give up their apartments.”

Downtown View is a column by newspaperwoman Karen Cord Taylor who founded The Beacon Hill Times in 1995 and served as its editor and publisher until late 2007. She also founded and served as editor and publisher of the Charlestown Patriot-Bridge and The Back Bay Sun weeklies. Karen now works from her home in downtown Boston and blogs at BostonColumn.com. Please feel free to leave responses in the comments section below.

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